12 Apr 2011

Reserve Bank expects farm export prices to remain high

12:15 pm on 12 April 2011

Reserve Bank Governor Alan Bollard expects prices for New Zealand's farm exports to remain at high levels for some time to come.

In a speech, Dr Bollard said a combination of factors, including bad weather, is behind the highest terms of trade in nearly 40 years.

While he expects prices to fall back as weather patterns return to normal, rising incomes in emerging economies like China should ensure that prices remain at high levels.

Dr Bollard says those high prices are not yet causing inflation problems, partly because of the New Zealand dollar, which is itself being driven by higher export prices.

But he says inflation could emerge as more of a problem if households and companies use higher incomes to boost spending or borrow more.